EXCELSIS – Assessment of the “S&P 500 Catholic Values Index”

The EXCELSIS Rating Committee was requested by the OFCCFO’s President to provide its assessment on the newly product created by SP Dow Jones Indices and called “SP 500 Catholic Values Index” (the “Product”).

PRESENTATION OF THE PRODUCT

The Press Release of August 19, 2015 mentions that the Product excludes companies apparently involved in activities that are deemed “inconsistent” with Catholic values as resulting from the Socially Responsible Investment Guidelines issued by the United States Conference of Catholic Bishops in November 2003. If companies are involved in the following activities, they will not be included in the Product:

Conventional Military sales – companies that have their primary business activity as military products,

Child labor employment in the company’s operation or in supply chain.

ASSESSMENT

The Christian Finance Observatory stress that, according to the Fundamental Charter of Christian Ethical Finance (the “Charta“), Christian Finance’s activities should pursue a “sustainable and virtuous development“. Any concept, product or service is deemed to be “virtuous if, without prejudice to the legitimate seeking of economic efficiency (liquidity, security, performance), it complies with the Fundamental Principles and follows one or more Positive Objectives“, in the meaning of the Charta. “The actors claiming to be part of Christian Ethical Finance adapt or add, where appropriate, other objectives or conducts in particular to integrate the new recommendations of the Church, or to take account of their cultural specificities or those of their clients” (Article 4).

On the one hand, the Product should be considered as a virtuous Christian Ethical Financial Activity as it clearly “promotes the dignity of the human person and the common good and solidarity, by applying the principle of subsidiarity“. The fact that activities related to warare excluded may be considered as “protecting human persons in the integrity of their lives, from conception to natural end“. The fact that the index purposes SMEs is also compliant with the principle of subsidiarity.

On the other hand, the Product could however not be regarded as fully virtuous: the Product is not fully compliant with the “new recommendations of the Church” (Article 4). It seems to be ignoring, at least, a key issues Pope Francis recently wrote in the encyclical Laudato Si : “highly polluting fossil fuels needs to be progressively replaced without delay”. In addition, several Positive and Negative Objectives in the meaning of the Charta were not taken into consideration. As a result, the Product could be deemed as not fully compliant with Articles 2.2 f) and 4 of the Charta.